Based on just the quote alone, not knowing the context, I would say:
Some mental illnesses involve delusions and hallucinations (for example, schizophrenia). These people believe strongly (have faith) that their delusions/hallucinations are true/real.
Objectively, we know that these people have a mental illness and that their beliefs about reality are not true.
Since faith is often talked about in a religious sense, I'll point out that many people have delusions/hallucinations that are religious in nature. Some people, for example, believe that they are god or a messenger from god; others believe that god, angels, demons, or the like are speaking to them (and may be telling them to do things).
Whether you're talking about faith in a religious context, or simply faith that your beliefs about something are true, the mentally ill provide a clear example of the fact that faith that something is true is not enough to prove that it is true.
Our minds are capable of convincing us that something is true, even if that thing isn't true. This doesn't mean that every person who has "faith" that something is true is mentally ill, only that we should strive to base our beliefs on more than just faith alone.